By
August 24, 2026
What Are Accounts Receivable for a UK Limited Company?
Accounts receivable are amounts that customers owe a UK limited company for goods or services that have already been supplied but have not yet been paid for.
In simple terms, accounts receivable represent money your company is waiting to collect from customers.
Suppose your UK company provides consulting services worth £5,000 and gives the customer 30 days to pay.
Invoice issued → £5,000
Customer pays immediately → No outstanding receivable
Customer pays in 30 days → £5,000 accounts receivable until payment
Once the customer pays, the outstanding receivable is cleared.
Your company might have:
Customer A → £2,000 due
Customer B → £5,000 due
Customer C → £3,000 due
Total accounts receivable:
£10,000
This means customers currently owe the company £10,000.
No.
A sale records the company's revenue from supplying goods or services.
Accounts receivable records money that has been invoiced but has not yet been collected, subject to the accounting basis used.
For example:
Invoice issued → Sale recorded → Accounts receivable created
Customer pays → Cash increases → Accounts receivable decreases
Amounts owed by customers are generally shown as debtors within current assets on a UK company's balance sheet.
They represent amounts the company expects to collect.
For example:
Current Assets
Cash: £20,000
Trade debtors: £15,000
Other current assets: £5,000
The difference is simple:
Accounts Receivable → Customers owe your company money
Accounts Payable → Your company owes suppliers money
Both are important for managing cash flow.
An ageing report groups unpaid invoices according to how long they have been outstanding.
For example:
Not yet due → £10,000
1–30 days overdue → £4,000
31–60 days overdue → £2,000
61–90 days overdue → £1,000
90+ days overdue → £500
This helps a company identify invoices that need to be chased.
A company can be profitable but still experience cash-flow problems if customers take too long to pay.
For example:
Sales → £100,000
Actually collected → £60,000
Still owed by customers → £40,000
The company may have recorded strong sales but still lack enough cash to pay suppliers, salaries or taxes.
Good receivables management includes:
Accounting software can automate much of this process.
Once the payment deadline passes, the invoice becomes overdue.
The company should normally:
Send reminder → Contact customer → Send final demand → Consider further recovery action
For qualifying B2B debts, statutory late-payment interest and recovery costs may also be available.
If there is little or no realistic prospect of collecting an invoice, it may eventually be treated as a bad debt.
The accounting and tax treatment depends on the circumstances, and VAT-registered companies may also need to consider the rules for VAT bad debt relief.
Consider:
New customers → Deposit or upfront payment
Regular customers → Net 14 or Net 30
Large projects → Milestone payments
Overdue customers → Restrict further credit
The aim is not necessarily to eliminate accounts receivable, but to make sure customers pay within the agreed terms.
Accounts receivable are amounts customers owe your UK limited company for invoices that have not yet been paid.
For example:
Invoice customer £5,000 → £5,000 accounts receivable → Customer pays £5,000 → Receivable cleared
Monitoring accounts receivable helps a UK company manage cash flow, identify overdue invoices and collect customer payments more efficiently.
